Consortium Legal – Nicaragua

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Ever since the Republic of Nicaragua became a member of
the Financial Action Task Force of Latin America (GAFILAT),
Nicaragua has experienced a gradual, yet impactful, overhaul in
its provisions regarding prevention, detection and
criminalisation of activities involving money laundering and
financing of terrorism.

After GAFILAT published the Mutual Evaluation Report for the
Republic of Nicaragua in October 2017, a series of key legal
reforms were introduced to correct the detected deficiencies.
As a matter of fact, two new laws were enacted in Nicaragua to
address these issues: the Financial Analysis Unit Law and the
Law Against Asset Laundering, Financing of Terrorism and
Financing the Proliferation of Weapons of Mass Destruction.

These new laws impose obligations on a series of entities to
prevent, detect and report any suspicious activities to the
financial analysis unit by conducting a series of compliance
procedures.

Although many of these obligations were already in force
before the promulgation of these new laws, broad powers were
given to the financial analysis unit to require more
information from public and private entities. Moreover,
entities required to have compliance procedures in place now
must report certain types of transactions, regardless of
whether they are considered suspicious.

The international financial industry has been particularly
affected by these new laws. The free movement of capital, which
has been unrestricted since the early 1990s, remains
unrestricted; however, these movements are now more closely
monitored by the financial analysis unit. For example, local
financial institutions must now request and submit more of the
originator`s personal information from foreign correspondent
banks and from foreign remittance originators regarding when
these transfers or remittances of money into Nicaragua exceed a
certain amount.

Some of these foreign correspondent banks and remittance
originators have been reluctant to share their clients'
information due to the privacy laws that apply to them and this
has placed local entities in a conundrum when it comes to
retaining their foreign partners and also complying with the
regulations imposed by the financial analysis unit.

The financial analysis unit will need to be informed about
the different legal regimes that may affect the information
responsibilities mentioned above with respect to foreign
privacy laws. Such authority will need to maintain supervision
over the Nicaraguan financial system and at the same time will
also need to review its criteria, and probably accommodate some
of its regulations in order to reach a balance between these
diverse legal frameworks.